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STEPHANIE MARIE SUTTON, CLAIMANT v. LINDSAY BURCH and KATHY KNIES, DEFENDANTS.

No. 2011 BCPC 0408

REASONS FOR JUDGMENT

OF THE

HONOURABLE JUDGE S.R. HARRISON

[1] In June 2009, the claimant, Stephanie Sutton purchased a horse from the defendants, Lindsay Burch and Kathy Knies, for $14,000. Ms. Sutton has alleged that at the time of the sale, both defendants were aware that Fao had received a significant and potentially chronic equine injury. This injury, diagnosed in June 2008 as a hind high suspensory injury, rendered the horse unsuitable for dressage or para-dressage training and competition. Ms. Sutton said that she expressly asked Ms. Burch, prior to any agreement to purchase the horse, whether he had suffered any injury. Ms. Burch told her several times, she said, that the horse had not.
[2] The claimant has submitted that the failure to disclose the existence of this injury to Ms. Sutton in the circumstances of this case amounts to fraudulent or alternatively negligent misrepresentation. The remedy sought by the claimant is rescission of the contract of sale and an award for damages in tort for the misrepresentation, or alternatively for breach of contract, such damages to include return of the purchase price and all costs associated with the purchase of the horse.
[3] Ms. Knies, the vendor, and Ms. Burch, her agent in the sale, are professional horsewomen. Both deny any knowledge of the injury to the horse or the veterinary diagnosis. Ms. Burch said that she was never asked by Ms. Sutton about injury to Fao but only whether he was sound. The defendants deny that Fao’s condition was misrepresented to Ms. Sutton. Ms. Knies and Ms. Burch both take the position that the horse was accurately represented to be sound. They say that any subsequent lameness has not been shown to be caused by the high suspensory injury.
[4] The defendants also rely on the terms set out in the bill of sale dated June 24, 2009 for the proposition that Fao was sold “without warranty of any kind” and say that the maxim caveat emptor: “let the buyer beware”, puts the risk of injury or unsoundness onto the shoulders of the purchaser.

The Evidence

[5] In light of materials contained in the written submissions put before me, I am obliged to point out that the only evidence which I can consider is that adduced in trial through witnesses called to the stand and the exhibits entered in evidence. Exhibit 1, experts’ reports, was admitted by consent of the parties. Admitting these reports by consent dispenses with the need for calling those experts in person to give evidence.

[6] The defendants, self-represented throughout the trial, included in their submissions additional facts which are not properly before me. I was also urged to take judicial notice of information available on internet websites. It would be improper for me to take such matters into account and I do not. The facts fall to be decided solely on the basis of the evidence adduced during the trial.

Background

[7] Fao, a gelding foaled in 2002, is a good size at just over 17 hands. Jutta Jealouse purchased him as a two-year-old from a vendor in Colorado for $6,000. Ms Jealouse sent Fao to Vancouver Island for dressage training. She hoped to have him trained for a competitive career. At one point she thought to keep him as a dressage horse for herself, but she later determined to train him for sale. Prior to the injury which concerns us in this case Fao had been on the market, Ms. Jealouse said, for $35,000.

[8] Fao was brought to Fieldstone, Ms. Jealouse’s equestrian facility in Kamloops. His training continued through the fall of 2007 and into 2008. In April or May of 2008, after returning from a trip abroad, Ms. Jealouse was advised by trainer Anthony Lothian that the horse had become lame. Mr. Lothian, an experienced riding teacher and horse trainer, confirmed that the lameness had occurred in April, 2008. He estimated that Fao may have been worth $20,000 to $25,000 prior to the injury.

[9] Because of his lameness, in June, 2008, Ms. Jealouse sent Fao to the Veterinary Teaching Hospital at Washington State University in Pullman, Washington for an evaluation. Ms. Jealouse described the work of the Pullman clinic as “state of the art” and “above par”.

[10] At Pullman, Fao was examined by Dr. Robert Schneider, a professor in equine orthopedics, who ordered ultrasound evaluation. Dr. Schneider concluded that Fao had a high suspensory ligament injury to the left rear limb and coffin joint arthritis in the right front foot.

[11] Dr. Schneider recommended a course of treatment for each of the injuries. A six month program of rest and rehabilitation was ordered for the hind high suspensory injury. Dr. Schneider said that the prognosis with respect to this injury was fairly good and assessed a 60% to 70% chance of returning to soundness. However, he also cautioned that hind high suspensory injuries can be chronic and a persistent source of lameness. In that case Fao might require further treatment, including surgery. Dr. Schneider’s report has been exhibited by consent of the parties. It is one of seven veterinary reports filed in the trial.

[12] From the evidence heard, I understand soundness in a horse to refer to a current absence of lameness or injury, although it also implies a fitness for purpose. A horse may be sound for trail riding, for example, but not for competitive sports.

[13] Ms. Jealouse was very concerned about the diagnosed injury. She said she could have engaged in a year long rehabilitation program with the horse, accepting that even so the lameness could return. She reasonably concluded that Fao had no future as a show horse given the high suspensory injury. Ms. Jealouse had two other horses in rehabilitation and she was not prepared to take on Fao as a third.

[14] Ms. Jealouse gave evidence that Fao’s high suspensory injury, the assessment that he was no longer suitable for dressage and that he needed a new home was well known in the equine community of which Fieldstone was a part and which included both Ms. Burch and Ms. Knies.

[15] Ms. Jealouse concluded that Fao had no value for resale outside the slaughter auction. Matching her action to her words, she gave Fao away to Melody Raines along with $1,000 for hay and hoof care. Ms. Raines was a Fieldstone employee with a fondness for the horse.

[16] Ms. Raines said she was made aware of the Pullman diagnosis, though she had not seen the report. This was confirmed by Ms. Jealouse. Ms. Raines’ knowledge of the injury and the Pullman diagnosis is also confirmed in postings she made to an online horse owners’ forum in June and July, 2008 in which she referred to being given Fao and requesting information on therapies for high suspensory injuries.

[17] Another witness, Michelle Tondevold, also took regular part in these posts discussing Ms. Raines’ progress in her efforts to rehabilitate Fao’s high suspensory injury. She advised Ms. Kuehni later that year that Fao was available for the asking from Ms. Raines. In light of the posts, it is difficult to accept that Ms. Tondevold could accurately say, as she did in evidence, that she had only heard a “rumour of a diagnosis of high suspensory injury”. She said it was her understanding that Ms. Raines had got him “for free” as the previous owner “didn’t like him and he was lame.”

[18] Both Ms. Jealouse and Ms. Raines gave evidence that in light of the diagnosis they regarded Fao only as a pleasure horse fit for casual riding, if he was sufficiently rehabilitated. Fao went to Ms. Raines without his registration papers, as they had been misplaced by Ms. Jealouse. That was no problem from Ms. Raines’ perspective, because as she put it, “a lame gelding didn’t need papers.”

[19] Ms. Raines described Fao at this point as “a lawn ornament,” though she hoped to see him rehabilitated for pleasure riding. Both women considered that Fao would likely never be fit for the more strenuous demands of dressage. This was an opinion shared by the trainer, Mr. Lothian.

[20] In the fall of 2008 Ms. Raines’ circumstances changed such that she was unable to keep Fao. Ms. Raines determined to find another home for Fao. Again, and for the same reasons, Ms. Raines was looking to give Fao away rather than sell him. Her concern was that if she could not find a home for Fao, he would be put down or sold for slaughter. Fao was not showing any obvious lameness at that time.

Kathy Knies and Fao

[21] Ms. Knies has been a professional equine massage therapist for ten years. She has provided therapy to many kinds of horses, including race, rodeo and show horses.

[22] Ms. Knies had worked on horses at Ms. Jealouse’s Fieldstone equestrian centre. She worked on Fao on three occasions while he was at Fieldstone in April and May, 2008, the period he went lame. Ms. Knies said she was not aware of Fao’s hind high suspensory injury. Ms. Knies added that she works on stiff and knotted muscles and that it was not her job or business to know of a horse’s injuries. Indeed she said that she makes a point of not knowing things which are not her business. Her clients relied upon her to be discreet.

[23] Kathy Knies and Connie Kuehni became interested in acquiring Fao from Ms. Raines and they spoke to her about it. They agreed to take Fao jointly.

[24] Ms. Raines was plain that she told Ms. Knies and Ms. Kuehni of Fao’s hind high suspensory injury and that they discussed it multiple times. Ms. Raines said she specifically discussed the Pullman diagnosis with Ms. Knies. Ms. Knies and Ms. Kuehni deny this.

[25] Ms. Raines said that Ms. Knies and Ms. Kuehni discussed a plan to put Fao out with a lame mare and that if he did well, he might become a pleasure horse for Ms. Kuehni. At no time did Ms. Raines understand that Ms. Knies and Ms. Kuehni intended to sell the horse. Ms. Raines said that Ms. Knies and Ms. Kuehni did not take Fao immediately but returned the following day to collect him. Ms. Knies and Ms. Kuehni disagree that they left to think about taking Fao, but took him at once to save him from the auction and slaughter.

[26] Ms. Knies said that she had no knowledge that the horse had been injured or diagnosed with high suspensory injury. She did not receive information to that effect from Melody Raines or anyone else. Nor did she recall knowing that Ms. Raines had obtained the horse without cost.

[27] Ms. Kuehni is a saddler, horse trainer and farmer. She gave evidence that she became aware that Ms. Raines was looking for a home for a horse that might otherwise go to auction. Ms. Kuehni set up a meeting to see the horse and brought Ms. Knies with her. She said no history was given for the horse, other than that Ms. Raines said the horse had never taken a lame step and ran with the other horses. There was, Ms. Kuehni said, no mention of a high suspensory injury, no reference to the Pullman report and no medical reports provided. She said she had no information on the age or breed of the horse. Ms. Kuehni said she and Ms. Knies looked at Fao for just 15 minutes and then they jointly took him, as she said, to save his life.

[28] The rapid decision described by Ms. Kuehni is at odds with a joint written statement made by Ms. Kuehni and Ms. Knies dated January 5, 2009 which stated that:

In the fall of 2008, I Connie Kuehni and I Kathy Knies were approached by Melodie Raines to take over ownership of Fao. After careful consideration, I Connie Kuehni and I Kathy Knies entered into a partnership of said horse, Fao. In January of 2009 I Connie Kuehni relinquished my part in the ownership of Fao and I Kathy Knies became the sole owner of Fao. Signed this 5th day of January, 2009 [signed:] C. Kuehni and K. Knies (Emphasis added)

[29] When questioned about the use of the phrase “after careful consideration”, Ms. Knies said that was a reference to the cost of feed for Fao. The use of this phrase is quite consistent with the overnight consideration Ms. Raines said Ms. Knies and Ms. Kuehni gave the arrangement before agreeing to take Fao.

[30] Ms. Raines agreed that she never saw Fao take a lame step, that he had been active enough to jump a fence and chase a pig, and that she had described him to Ms. Knies and Ms. Kuehni at this time as being “dead sound” over the previous four months. She also said that this was consistent with her view that Fao was not sound as a show horse, but was as a pleasure horse.

[31] Ms. Jealouse said that she had become aware that Fao had gone to Ms. Knies and Ms. Kuehni. She said spoke to Ms. Knies who told her that Fao would become a trail horse on a 30 acre property and that Ms. Kuehni would ride him. Ms. Jealouse was pleased and said this was good news for Fao. She testified that Ms. Knies said nothing to her of any plan to sell Fao.

[32] Ms. Jealouse said she was not aware that Ms. Burch had listed Fao for sale in 2009. She found out Fao had just been sold when Ms. Kuehni told her after a show on June 24, 2009.

[33] Ms. Jealouse described Ms. Kuehni as quite excited about the sale. She seemed surprised at Ms. Jealouse’s negative reaction. Ms. Jealouse said she was concerned that the purchaser would not have been told about Fao’s hind high suspensory injury. She called Ms. Knies and Ms. Burch and left messages for both.

[34] Ms. Knies called her back. According to Ms. Jealouse, Ms. Knies said that she had been reluctant to call her “as I knew you would be emotional.” Ms. Jealouse replied to the effect that it had nothing to do with being emotional and everything to do with selling a horse who shouldn’t have been sold to a show home. Ms. Jealouse said that Ms. Knies told her she had been “rehabbing” the horse and had put a lot of effort into it. Ms. Jealouse said to Ms. Knies that the high suspensory injury was not something to be fixed overnight and would linger for the rest of his life.

[35] She then asked Ms. Knies whether she had told the new owner about Fao’s high suspensory injury. Ms. Knies would not answer that question, she said. Ms. Jealouse concluded that the high suspensory injury had not been disclosed as this young, inexperienced horse, with the injury revealed, was not in her view worth anything approaching the asking price advertised by Ms. Burch. To be clear, Ms. Knies did not assert to Ms. Jealouse that she didn’t know of the high suspensory injury.

[36] Some time after that Ms. Sutton obtained Ms. Jealouse’s contact information through the breeders’ registry, in an attempt to obtain Fao’s registration papers. Ms. Jealouse told Ms. Sutton about Fao’s high suspensory injury and later provided her with a copy of the Pullman report.

[37] Over the six months that Ms. Knies owned Fao, she said she administered 50 massages to this horse, none of them related to the high suspensory injury of which she knew nothing.

Lindsay Burch and Fao
[38] Ms. Burch is a qualified dressage rider and professional trainer. She has ridden and trained in dressage since she was 12 years old. She has trained here and in Europe and has competed in Canada and the US with good success.

[39] Ms. Jealouse came to know Ms. Burch through their mutual interest in horses. They became, as Ms. Jealouse described it, very good friends. She invited Ms. Burch to come to Kamloops to live with the Jealouses. Ms. Burch did so in May or June 2008 until September of the same year. During that time she worked with Ms. Jealouse’s horses. On two occasions Ms. Burch accompanied Ms. Jealouse on trips to Holland.

[40] Ms. Jealouse said that Ms. Burch may not have been involved when Fao went lame, but she was at the Jealouse’s over the period that rehabilitation was attempted. Ms. Jealouse said that at this time she was very vocal about her three lame horses, including Fao, and that people at Fieldstone generally knew of her problems and Fao’s diagnosis.

[41] Ms. Jealouse said that Ms. Burch helped to send Fao and another horse to Pullman for the lameness evaluation in June, 2008. She said Ms. Burch loaded the horses on the transport. Ms. Burch agreed that she had loaded Fao and another horse onto the trailer at 4:00 a.m. but said she was unaware of Fao’s lameness or that he was headed for the clinic in Pullman.

[42] Ms. Jealouse said she specifically discussed Dr. Schneider’s diagnosis with Ms. Burch: the hind high suspensory injury and arthritic changes in front. Ms. Jealouse said Ms. Burch read the Pullman diagnosis herself and they talked about the options regarding Fao. They discussed concerns that if Ms. Jealouse kept Fao she would have three horses in rehabilitation and still there would be the risk that the high suspensory injury would return. Ms. Burch was actively involved in the rehabilitation of one of the other horses, Maurice.

[43] Glen Jealouse, husband of Jutta Jealouse, gave evidence to say that during the period that Ms. Burch stayed with them, she worked on Ms. Jealouse’s horses and became a friend of the family. He said they often discussed the state of Ms. Jealouse’s horses and that Ms. Burch was present at times when Fao’s high suspensory injury was discussed. Mr. Jealouse described Fao as a favourite.

[44] Ms. Burch said she never saw, read or discussed the Pullman report with Ms. Jealouse. She had no knowledge of Fao’s diagnosis or his injury. She did acknowledge that she was aware from conversation with Ms. Jealouse (before Fao was sold to Ms. Sutton) that Ms. Jealouse did not have Fao’s registration papers, that they were lost. She advised Ms. Sutton of this on August 27, 2009. There was never any conversation between Ms. Jealouse and Ms. Burch regarding Fao’s injury or diagnosis, according to Ms. Burch.

[45] It will be recalled that Ms. Kuehni told Ms. Jealouse that Fao had been sold by Ms. Knies and Ms. Burch. Ms. Jealouse called both defendants and left messages. Ms. Knies returned her call; Ms. Burch did not. As a result, on July 2, 2009 Ms. Jealouse sent a Facebook message to Ms. Burch emphasizing that she had given Fao away as a pleasure horse.

[46] She said in the message:

“Hello Lindsay,

Neither you nor Kathy have contacted me regarding Feo. I hope you realize that I have not signed over his papers to Kathy as he was given away as a pleasure horse. You had no legal rights selling him. You knew about his history. I will insist that you put the money you received in trust for a year to make sure Fao will stay sound. If he does not, the money needs to be returned to the buyer. Please get back to me.

Jutta”

[47] Ms. Jealouse said she never heard directly from Ms. Burch, though she did say Ms. Burch posted something on Facebook to the effect that “If you give something away, it’s not yours anymore.”

Kathy Knies and Lindsay Burch

[48] Ms. Burch gave evidence that she had met Ms. Knies through Ms. Knies’ son and that Ms. Knies had asked her to ride Fao. She said there was no real discussion about selling Fao, just about Ms. Burch training him. Ms. Burch was not paid for the training, however she later valued her work with Fao at $5235 over the period January through June, 2009. When the plan to sell Fao arose, it was agreed between them that Ms. Burch would sell the horse on her behalf and charge Ms. Knies a 40% commission, to reflect the value of the training that Ms. Burch had provided. Ms. Burch again denied any knowledge of the high suspensory injury and said that the horse was sound throughout the training period.

[49] Ms. Knies gave evidence that after she became Fao’s sole owner in January 2009, she hired Ms. Burch to train him. The training was vigorous and Fao looked in her words “quite amazing”. In the spring of 2009 she decided to sell him and she asked Ms. Burch to do that for her. Ms. Knies said she knew nothing of Fao’s medical history. She had been provided with no history by Ms. Jealouse or Ms. Raines and had no such knowledge to impart to Ms. Burch.

[50] Ms. Knies said that it was not correct to say that everybody knew of the high suspensory injury to Fao. She said that she didn’t know and that she made a point of not knowing the state of the horses she worked with.

The purchase and sale of the Fao to Ms. Sutton

[51] Ms. Sutton, a grade three para-equestrian rider, gave evidence that her eventual goal was to compete at an international level in para-equestrian dressage. She had been looking at horses for a year and wanted one suitable for training up to competition at that level. Ms. Sutton had rejected most of the horses she had seen. This was not her first horse.

[52] Ms. Sutton had a list of qualities she was looking for in her horse: she wanted a sensible horse with good temperament, even and steady movement – an important factor given her own disability-related balance problems, an absence of previous injuries and an ability to attain a higher level of dressage training. Ms. Burch agreed that Ms. Sutton had told her words to the effect that she was looking for a quiet steady horse suitable for a para-equestrian rider and suitable for training to third level para-dressage.

[53] Ms. Sutton was well aware of hind high suspensory injury and understood it to be a cause of chronic and persistent lameness. It was her understanding that such an injury would very rarely permit the level of training required for international competition in para-dressage. She said that any hint of a problem in the gait of a horse would render it unsuitable for the demands of competition. Given the level of commitment she was looking to make in pursuing her aspirations, Ms. Sutton said under no circumstances would she have considered that a horse with a hind high suspensory injury would be suitable for her purposes.

[54] Ms. Sutton’s assessment was supported by the report of Dr. Hawkins, a veterinarian who agreed that a horse with high suspensory injury would rarely be suitable for a career in dressage. A high propensity for reoccurrence of this injury was identified in several experts’ reports.

[55] Fao was advertised by Ms. Burch on her website as a registered Holsteiner and was described as trained in second level dressage and a sound horse. Ms. Sutton responded to the advertisement and arranged to come to Kamloops from the coast to see the horse. She was accompanied by her mother and her riding coach.

[56] Ms. Burch rode Fao, followed by Ms. Verda and Ms. Sutton. No issues were noted while Fao was ridden.

[57] The areas of discussion between Ms. Sutton and Ms. Burch covered her needs, his history, his level of ability and training, what he’d done, his temperament and personality quirks; as Ms. Sutton described it, about as much information as she could think to ask for. Ms. Sutton said that she was careful to ask Ms. Burch several times whether the horse had any previous injury and that on each occasion she was told that Fao had suffered no injury.

[58] Ms. Sutton gave evidence that this purchase represented a significant financial commitment for her. She had a line of credit in place specifically for the purchase. She was being careful with the purchase. She brought her riding coach of three years, Sandra Verda, with her to Kamloops as well as her mother, Marie Sutton. Ms. Verda was acting as a paid consultant to provide advice on any potential purchase. Ms. Sutton would require any horse to pass a pre-purchase veterinary examination at her own expense.

[59] Ms. Burch gave evidence that Ms. Sutton and her party never asked about pre-existing injuries to Fao. Ms. Sutton did ask her questions about Fao’s soundness. Ms. Burch replied that Fao had always been sound when she trained him. Ms. Burch said in court that although she had loaded Fao and another horse onto a trailer for Pullman, she never knew of Fao’s lameness. “I never saw him take a lame step.” She said if she’d had a copy of the Pullman report, she’d have disclosed it to Ms. Sutton.

[60] Ms. Burch also stated that her work on other people’s horses is confidential and that she has a duty not to disclose information regarding a client’s horse. To do so, she said, would be unprofessional and could result in a loss of the job. Ms. Knies made a similar point in her evidence, that it was her duty to maintain confidentiality of information learned about a clients’ horse.

[61] If the point of these statements was to assert that if Ms. Burch or Ms. Knies had learned of Fao’s injury while working for Ms. Jealouse, any information regarding the injury would have remained confidential after Ms. Knies had acquired the horse, that assertion would be incorrect. Neither Ms. Knies nor Ms. Burch were bound to deny to Ms. Sutton, or mislead her, as to the existence of an injury known to them when she asked the question.

[62] Ms. Sutton’s mother, Marie Sutton, gave evidence that she too spoke with Ms. Burch and also asked her if she knew of any injury to the horse. Ms. Burch said she did not. Ms. Verda didn’t give evidence at this trial as she was said to be out of the country at a competition. I draw no inference from her non-attendance.

[63] After discussing the matter with Ms. Verda, Ms. Sutton decided that night to make an offer on Fao, subject to the results of a pre-purchase veterinary examination. A price of $14,000 was agreed with Ms. Burch. From Ms. Sutton’s perspective, this price reflected the fact that Fao had training but no show experience.

[64] In agreeing to purchase Fao, Ms. Sutton said that she relied upon Ms. Burch’s statement that Fao had not suffered any injury. Ms. Sutton did not personally know Ms. Burch, although Ms. Verda did. Ms. Sutton understood that Ms. Burch was an experienced dressage rider and had been trained by well known coaches. Ms. Burch was known in the dressage community.

[65] Ms. Sutton said her reliance was reflected in the instructions she gave the veterinarian who conducted a basic pre-purchase examination of Fao. Dr. Mulligan performed this examination in accordance with instructions provided by Ms. Sutton, at a cost to her of $1,256. It is clear that this examination would not likely have discovered the earlier hind high suspensory injury absent specific directions to look for it. Ms. Sutton’s case is that she relied on Ms. Burch’s assertions of no prior injury in setting the parameters of the pre-sale examination.

[66] In his report, Dr. Mulligan identified that the gelding was being considered as a para-equestrian dressage horse for the purchaser. The medical history of the horse was provided to him by Ms. Burch at the time of examination, he reported, and had been provided to the purchaser. There was no mention of a hind high suspensory injury, the lameness evaluation at Pullman or the subsequent diagnosis and report from Pullman. He certainly did not identify the suspensory injury as part of his findings. Dr. Mulligan did not report any finding which would affect Fao’s future soundness for para-equestrian dressage. The sale proceeded when the report was received.

[67] Dr. Mulligan, in a supplementary letter exhibited by consent, advised that had he been provided with such information, further diagnostics would have been recommended to Ms. Sutton if she wanted to pay for it. Absent those diagnostics, Dr. Mulligan was unable to say how his opinion might have changed if he had been made aware of the previous injury.

[68] Ms. Knies and Ms. Burch both gave evidence that Ms. Knies had granted Ms. Burch full authority to sell Fao on her behalf. Ms. Knies was aware that Ms. Burch had advertised the horse on the internet.

[69] At the time of the sale Ms. Sutton was not aware of Ms. Knies’ ownership interest in Fao. Ms. Knies was not mentioned in the internet advertisement or during the discussions between Ms. Burch and Ms. Sutton. Ms. Sutton made out a cheque payable to Ms. Burch to be held pending the results of Dr. Mulligan’s examination. Dr. Mulligan identified Ms. Burch as the vendor in his report to Ms. Sutton.

[70] Ms. Sutton only became aware of Ms. Knies’ involvement when she was later sent and asked to sign a bill of sale dated June 24, 2009, describing Lindsay Burch and Kathy Knies as sellers. The horse was there stated to be sold “without warranty of any kind”, though it is not very clear that this term was one agreed by the parties at the time the contract was formed and the monies paid.

The Veterinarians’ Reports

[71] Ms. Sutton said that Fao was fine in the first month she owned him when he was worked lightly. In the second month, a hop in his gait was noted and an appointment was made to have him seen by Dr. Hawkins, her veterinarian. Before that appointment arrived, Ms. Sutton made contact with Ms. Jealouse and Ms. Sutton learned of the high suspensory injury and subsequently obtained a copy of the Pullman report.

[72] Ms. Sutton’s veterinarian, Dr. Hawkins, examined Fao on September 9, 2009 and found him to be unsound while being ridden. He had an “unacceptable gait deficit for performance as a dressage horse at any level”. In April, 2010, Dr. Geertsema, a veterinarian retained by the defendants, examined Fao and noted a shortened stride on the left hind but could not, on that limited examination, determine a current problem with the suspensory ligament. Further examination, he thought, might determine whether the asymmetrical movement was due to the proximal suspensory injury or other cause.

[73] Dr. Hawkins said that in light of the injury diagnosed at Pullman, Fao was not a suitable candidate for dressage. It would be rare, she said, to have a horse with this medical history pass a pre-purchase examination without significant reservations as to future soundness. Even with rigorous rehabilitation, there is a very high rate of reoccurrence in dressage. She said it’s a common career ending injury for dressage horses. Dr. Hawkins described it as their “Achilles heel.” I find Dr. Hawkins’ opinion persuasive.

[74] Dr. Geertsema agreed that a horse with the injury diagnosed at Pullman can heal and return to soundness, but will be more prone to reinjury.

[75] Ms. Burch disagreed with Dr. Hawkins’ opinion and said that many dressage horses have a hind high suspensory injury, particularly older ones, without ending a career. There are varying degrees of injury. She said she would have noticed a high suspensory injury, had it been present. Fao wouldn’t have been able to perform the workload she gave him if he had a high suspensory injury. He was never resistant or lame, she said in evidence.

[76] The veterinarian reports and other evidence at times focused on whether or not Fao was lame at any particular point. This evidence does not address the issue whether a horse known to have a high suspensory injury of this sort, but which was not then exhibiting lameness, could reasonably be described as suitable for para-dressage. In my view it could not. Both competitive dressage and para-dressage are clearly demanding sports for both horse and rider. Given the high rates of recurrence and reinjury identified by the veterinarians, anyone expecting to train and compete in dressage with such a horse would have to recognize that the horse could at any point become unfit for training or competition.

Findings of Fact

[77] There is no doubt that Fao suffered a hind high suspensory injury as diagnosed by Dr. Schneider in the Pullman report. However, the evidence relating to the defendants’ knowledge of that injury is in sharp conflict. Both defendants have asserted that they did not know of Fao’s high suspensory injury. I will deal with the evidence as it applies to Ms. Burch, and then with Ms. Knies.

Lindsay Burch

[78] The evidence provided by the Jealouses, if accepted, clearly establishes Ms. Burch’s knowledge of the injury and the Pullman report on it. Ms. Jealouse gave evidence that Ms. Burch was a friend, living as a guest in her house, helping with Ms. Jealouse’s horses at the very time that Fao was lame. She was present when Fao was sent to Pullman for the lameness assessment and loaded Fao onto a trailer herself for the trip to Pullman. She was present over the period Fao returned from Pullman and the report was received. Ms. Burch had the report in hand and read it herself. She was described as involved in discussions with Ms. Jealouse about the injury, Ms. Jealouse’s options and what she should be done with the horse.

[79] After the Fao’s sale to Ms. Sutton, Ms. Jealouse sent a Facebook message expressing indignation at the sale and including the comment “You knew about his history”. Ms. Burch did not respond directly to Ms. Jealouse or deny the allegation, in effect, that she had withheld important information from Ms. Sutton about the high suspensory injury at the time of sale.

[80] Ms. Jealouse has no obvious or apparent reason to fabricate evidence. She has no interest in the outcome of this trial. Her evidence here was consistent with what she was saying at the time she found out about the sale. She was supported by Mr. Jealouse and to some extent by Ms. Raines, who were both credible witnesses. The decision of Ms. Jealouse to give away a horse which she had recently valued at $35,000, along with $1,000 for feed and care, was an effective demonstration of both her assessment of the value of the horse and her integrity in her dealings with it. In the presentation of her evidence, I found Ms. Jealouse to be a clear and convincing witness.

[81] By contrast, I found Lindsay Burch’s assertions that she did not know of Fao’s injury or diagnosis to be weak and unconvincing. Ms. Burch gave evidence which seemed at times and in turns highly improbable in the circumstances, evasive or beside the point.

[82] For example, Ms. Burch gave evidence that she did not discuss Fao’s injury with Ms. Jealouse, though they were equestrians and friends living in the same house. “I stayed out of her business,” said Ms. Burch. She knew nothing of Fao’s injury but was up at 4:00 a.m. to load the horse for transport to Pullman. The resulting diagnosis was certainly a blow to Ms. Jealouse, representing for her an end to her hopes for Fao’s dressage career and a loss to her worth tens of thousands of dollars but according to Ms. Burch, over the approximately three months which she stayed there, nothing about Fao’s injury or diagnosis was spoken between the friends.

[83] Ms. Burch also claimed that Dr. Mulligan, one of her vets, got it wrong when he included in his report of the pre-purchase exam that “Fao’s medical history was given by the seller, Lindsay Burch at the time of the exam and was made known to the buyer prior to the exam.” Dr. Mulligan’s report struck me as thorough, careful and cautious and not likely to be based on supposition or assumption on such a basic factual assertion.

[84] Ms. Burch’s email to Ms. Sutton after the purchase stating “I got into contact with the lady who used to have him and she said the papers were lost” seems crafted to suggest that Ms. Burch had recently sought out Ms. Jealouse to look for the registration papers, which was certainly not the case. Indeed Ms. Burch was not then responding to Ms. Jealouse’s repeated attempts to discuss the sale with her.

[85] I reject the evidence of Ms. Burch. I have no doubt at all that Ms. Burch was well aware of both the injury and the diagnosis as described by Ms. Jealouse, whose evidence I accept.

[86] There were also contradictions between Ms. Burch and Ms. Sutton as to whether or not Ms. Sutton asked Ms. Burch whether Fao had suffered any previous injury. Ms. Sutton was adamant in her evidence that she asked that question several times and each time was assured that there had been no injury. Ms. Burch was sure that she was not asked about pre-existing injury but only about soundness. She said she responded that the horse was sound, a statement she believed to be true.

[87] I’m satisfied Ms. Sutton was a cautious and prudent purchaser in the search for a suitable horse for her para-dressage ambitions. There is every reason to expect that Ms. Sutton would have asked a most basic and fundamental question about previous injury. I found Ms. Sutton’s evidence entirely credible.

[88] By contrast, Ms. Burch’s account of these events is not believable. It is pellucidly clear that Ms. Burch, being aware of the injury as I have found, determined to withhold that information from Ms. Sutton in spite of her inquiries. Frank disclosure of the high suspensory injury would no doubt have resulted in a much reduced value for the horse or most likely, no sale at all.

Kathy Knies

[89] Ms. Jealouse gave evidence that Ms. Knies was working with Feo over the period that he went lame and asserted that it was a matter of general knowledge of those at Fieldstone that Feo had a high suspensory injury. Ms. Jealouse said that she spoke with Ms. Knies after the sale and that Ms. Knies said she knew Ms. Jealouse would be upset, but that she had “rehabbed” Fao. She would not answer the question as to whether she had advised the purchasers of the high suspensory injury. Again, Ms. Jealouse is a credible witness.

[90] Melody Raines was clear in her evidence that she told Ms. Knies and Ms. Kuehni of Fao’s hind high suspensory injury before they took him. She said that they discussed it multiple times. Ms. Raines said she specifically discussed the Pullman diagnosis with Ms. Knies. Both Ms. Knies and Ms. Kuehni denied this.

[91] There is good reason to believe Ms. Raines when she says she told Ms. Knies about the injury. She was giving away a fond pet, not selling a future prospect. There was nothing in it for Ms. Raines to hide Fao’s injury from Ms. Knies. The chances of successfully masking the animal’s health history were slim given that the provenance of the horse, its history at Fieldstone and its injury were all well known in the community to which they all belonged.

[92] It is difficult to accept Ms. Knies’ evidence that she had no knowledge of the horse’s lameness and high suspensory injury diagnosis. She knew the horse. She had worked on Fao at Fieldstone in the spring of 2008 and must have known that he had gone in short order from a promising horse, actively trained, to an animal that was now being given away. Her assertion in these circumstances that it was not her job or business to know of a horse’s injuries is entirely unconvincing.

[93] There is no doubt that the defendants invested considerable time, effort and value to bring Fao along in dressage. Ms. Knies estimated her expenses for Feo at $7100 for the first six months of 2009. The largest item on the account was for 50 massages she performed at a value she claimed at $70 each. Ms. Knies denied that the 50 massages were performed to rehabilitate the high suspensory injury and said that they were merely to help with the training program the horse was undergoing with Ms. Burch. Ms. Burch reckoned her investment in training Fao and related costs to be worth $5235 over the same period.

[94] Ms. Knies knew that Feo had left his training program to become a give-away horse just a few months later. It is unlikely that she would have committed the time and money to bring Feo along without making any inquiry at all of Ms. Jealouse or Ms. Raines as to the reason why his previous training had been abandoned. The obvious answer is that she, like Ms. Burch, knew of Feo’s high suspensory injury.

[95] Ms. Kuehni’s evidence supported Ms. Knies’ position that Ms. Raines had not informed them of Feo’s high suspensory injury at the time they agreed to take him. However, in light of the evidence which I do accept, I’m satisfied that this evidence does not accurately reflect the state of Ms. Knies’ knowledge of the injury and it cannot be relied upon in that regard.

[96] I am satisfied that the claimant has proven to a high standard that Ms. Knies had knowledge of Feo’s hind high suspensory injury. I accept that both Ms. Knies and Ms. Burch were professionals in the field and well understood Fao’s diagnosis, the prospects for recurrence and the implications for future performance and price. It is quite evident that Ms. Burch, on behalf of Ms. Knies, elected not to disclose Fao’s injury to Ms. Sutton, despite being asked more than once.

Liability
Fraudulent Misrepresentation

[97] Fraudulent misrepresentation is defined in Fridman, The Law of Contract in Canada, 3rd ed. (Vancouver: Carswell, 1994) at page 295 as follows:

A fraudulent misrepresentation consists of a representation of fact made without any belief in its truth, with intent that the person to whom it is made shall act upon it and actually causing that person to act upon it.

[98] See 411397 B.C. Ltd. v. Granmour Holdings Ltd. [1996] B.C.J. No. 1310 (BCSC) paragraph 32. In that case, Mr. Justice Melnick at paragraph 33 cited Lord Atkinson in United Shoe Machinery Co. v. Brunet [1909] A.C. 330 at 338 (P.C.) for the four essential elements of fraudulent misrepresentation:

1. that the representations complained of were made by the wrongdoer to the victim;

2. that these representations were false in fact;

3. that the wrongdoer, when he made them, either knew that they were false or made them recklessly without knowing whether they were false or true;

4. that the victim was thereby induced to enter into the contract in question.

[99] The claimant has amply made out the claim of fraudulent misrepresentation. Ms. Burch repeatedly represented to Ms. Sutton that the horse had no previous injury. That representation was false as the horse had been significantly injured. This was confirmed in the Pullman report and the common significance of the injury to a dressage horse was set out in the report of Dr. Hawkins. Ms. Burch knew of the injury and the report but denied the existence of any previous injury. This was a deliberate misrepresentation on a matter of fundamental importance to Ms. Sutton’s decision to purchase and which caused Ms. Sutton to enter into the contract, as it was no doubt intended to do.

[100] To be clear, it was not a matter of mere opinion or “puffery” of the sort found in the Georgia Court of Appeals case cited by the defendants: Sheffield v. Darby 535 S.E.2d 776.

[101] Ms. Knies and Ms. Burch have adduced evidence to establish that the horse was not lame and could be ridden in competition. However, the issue here is not about whether the horse has shown lame at any particular time, or about what the horse might or might not be able to do. This horse was sold to a questioning buyer expressly as an animal with no history of injury. It was said to be suitable for the demands of para-dressage training and competition, when the vendor well knew the horse had suffered a significant injury and was at serious risk to become chronic.

Negligent Misrepresentation
[102] As I have found the claimant’s case for fraudulent misrepresentation to be made out, I need not address in any detail the alternative argument of negligent misrepresentation. It will suffice to say that in the alternative, the five part test set out in Queen v. Cognos Inc. [1993] 1 S.C.R. 87 has been met. I would have no difficulty finding that in the circumstances of this case, the vendors owed the purchaser a duty of care to disclose these material facts and that they breached that duty.
Vicarious Liability
[103] The vicarious responsibility of Kathy Knies for the fraudulent misrepresentations of her agent, Lindsay Burch, is clear in law. This would be the case whether or not Ms. Knies had knowledge of the fraud, as it was committed within the scope of Ms. Burch’s authority, which was to sell the horse. See Thompson v. Aiken [1977] B.C.J. No. 1021, 2 B.C.L.R. 23 (BCSC) at paragraphs 21 and 22, and British Columbia Ferry Corporation v. Invicta Security Service Corporation, 1998 CanLII 290 (BCSC) at paragraphs 8 and 10.
No Warranty
[104] The defendants assert that the exclusionary term found in the bill of sale that the horse was sold “without warranty of any kind” prevents reliance by the claimant on any alleged misrepresentation, particularly where the claimant brought her own expert, Ms. Verda, into the process and had the horse examined by a veterinarian: Ronnquist v Lang and Bridgeview 2002 BCPC 0331. Assuming the “no warranty” term formed part of the terms of agreement between the parties, it cannot stand in the face of statements made fraudulently. The law is clear in this area. A party to a contract cannot rely on an exclusionary clause to avoid liability for fraud: Dhillon v. Houston 1993 CanLII 2524 (BCSC), page 3.
Caveat Emptor
[105] They also assert the legal principle “let the buyer beware” to the effect that generally speaking no vendor has an obligation to disclose defects in property being sold, particularly where that defect is discoverable upon reasonable inspection: Issler v. Wall and Stogrin 2002 BCPC 0494, paragraph 15.

[106] However, fraudulent misrepresentation is also an exception to the general principle “let the buyer beware” and will not operate to permit a vendor to escape the consequences of fraudulent statements: Vershinin v. Amnibahksh & Bateni, paragraph 3. Neither of these defences is available to the defendants.

Damages

[107] Fraudulent misrepresentation is an action in tort rather than contract and the remedy for a successful claimant is to be reimbursed for the whole extent of her loss: Dhillon v. Houston, page 5. Madam Justice Koenigsberg in Esfhani v. Kaboodani 2007 BCSC 1654, quoting Waddams in The Law of Damages, said at paragraphs 9 and 10:

The measure of damages in a case of fraudulent misrepresentation is “the amount of money required to put the plaintiff in the position that would have been occupied not if the statement had been true but if the statement had not been made.” The traditional award for damages for fraudulent misrepresentation is the loss of capital.

Damages for consequential losses resulting from the fraudulent misrepresentation may also be recovered as long as they are not too remote.

[108] Madam Justice Koenigsberg went on at paragraph 10 to quote Lord Denning in Doyle v. Olby (Ironmonger) Ltd. [1969] 2 Q.B. 158 (C.A.) regarding consequential damages:

I think that Lord Collins did express himself in too rigid terms. He seems to have overlooked consequential damages … The object of damages is to compensate the plaintiff for all the loss he has suffered, so far, again, as money can do it … The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say:

“I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but what is more, I have been put to a large amount of extra expense as well and suffered this or that extra damages.”

All such damages can be recovered: and it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen. For instance, in this very case Mr. Doyle has not only lost the money which he paid for the business, which he would never have done if there had been no fraud: he put all that money in and lost it; but also he has been put to expense and loss in trying to run a business which has turned out to be a disaster for him. He is entitled to damages for all his loss, subject, of course to giving credit for any benefit he has received.

[109] I have accepted that Ms. Sutton would not have purchased Feo had she known about the previous injury. Ms. Sutton is entitled to be put, so far as possible, into the position she would have been in had she not purchased the horse at all.

Result

[110] The purchase contract is rescinded and the horse is to be made available for collection by the defendants within 15 days of the date of these reasons unless other arrangements are agreed in writing by the claimant.

[111] Ms. Sutton claims for the following items:

1. Purchase price of Feo: $14,000.00

2. Interest on line of credit: $ 1,132.91

3. Dr. Mulligan’s pre-purchase examination $ 1,256.85

4. Horse transport to Lower Mainland $ 275.00

5. Veterinary Services (Dr. Hawkins) $ 357.00

6. Stable Invoice $ 3,000.00

7. Burgi Rommel boarding invoices $ 5,725.00

8. Farrier expenses $ 780.76

Total $26,527.52

[112] I am satisfied that the financing costs expended by Ms. Sutton in putting together the purchase price for Feo are properly included as consequential damages. The other expenses all represent funds disbursed by Ms. Sutton which would not have been expended had the purchase not been entered into. I am satisfied that Ms. Sutton took the steps available to her to mitigate losses, for example, by arranging less expensive board for Feo and by working off part of the board costs.

[113] The claim is allowed in the amounts submitted to the extent of the jurisdiction of this court, being $25,000, jointly and severally against Ms. Burch and Ms. Knies. The claimant is also entitled to filing and service costs.

[114] Interest pursuant to s. 1 of the Court Order Interest Act is allowed at the approved rates up to the value of the award, excluding the interest on the line of credit, shown in item 2 above. Interest on items 1, 3 and 4 are to be calculated from June 26, 2009 to the date of this order. Interest on items 5, 6, 7 and 8 are to be calculated in accordance with s. 1(2) and (3) of the Court Order Interest Act from the dates set out in Exhibits 11, 6, 7, and 8 to the date of this order, provided that no interest is to be paid on any amount in excess of $25,000.

[115] The claimant has asked to be allowed to address the issue of reasonable charges and expenses directly related to the conduct of these proceedings under Rule 20 of the Small Claims Rules. The Registry will set a date for the hearing of this application.

S.R. Harrison

Provincial Court Judge